If you hold overnight positions/swing trade, how do you hedge against gaps up/down?
- Thread starter Nutinsider
- Start date
No, i was fortunate in that i had a tight stop and was taken out after the first plane hit. The market, after stopping me out actually went back up a bit and then suddenly smashed down after the 2nd plane hit.
If i had a larger stop in that particular case, i would have had huge slippage, or may even been locked out when the markets were closed down.
If i had a larger stop in that particular case, i would have had huge slippage, or may even been locked out when the markets were closed down.
Guys - options are the classic instrument for hedging. However, that does NOT mean they are cheap....you'll have to pay a price for the hedge.
For instance, Copper has been moving fairly well recently, but margins are about 5500. And you get a margin call if you are down only 7 cents which is only about one-third of the limit move.
So going into the weekend, if you are long, you'd place a market order for the at-the-money copper PUT contract for the current expiration month. (Use CALLS for short positions in the futures).
WIth the above hedge, a limit move has little to no impact on your overall position balance.
For instance, Copper has been moving fairly well recently, but margins are about 5500. And you get a margin call if you are down only 7 cents which is only about one-third of the limit move.
So going into the weekend, if you are long, you'd place a market order for the at-the-money copper PUT contract for the current expiration month. (Use CALLS for short positions in the futures).
WIth the above hedge, a limit move has little to no impact on your overall position balance.
long dotm puts.
very expensive over the long haul
for the few times they save your ass, you probably over the course of a year only break even
that is, you would be better off just taking the hit
like I said, 50% of the times these gaps go in your favor
I'm not in love with my positions, I can just close them out and get flat for very little cost, commissions aren't too bad, spread can be a little rough
for the few times they save your ass, you probably over the course of a year only break even
that is, you would be better off just taking the hit
like I said, 50% of the times these gaps go in your favor
I'm not in love with my positions, I can just close them out and get flat for very little cost, commissions aren't too bad, spread can be a little rough
